Question

Jamee is a resident taxpayer. For the year ended 30 June 2020 he received:

Gross salary of $82,000 from which PAYG of $20,100 had been withheld.

Net interest of $745 after TFN withholding tax of $715 had been withheld.

In September 2019 Jamee received $1,100 as his share in the winnings from a punters club with his work colleagues.

In January 2020 he received a holiday valued at $3,400 from his employer for achieving the highest sales in the previous year.

In June 2020, Jamee’s employer announced that he would be giving Jamee a pay rise effective from 1 April 2020. He is therefore to receive backpay of $2,000 of which $1,000 will be paid on 27June 2020 and the remaining $1,000 will be paid on 4 July 2020.

Dividend of $12,000 deposited to his bank account in May 2020 in respect of a 70% franked Australian dividend (company tax rate 30%).

Interest on a term deposit with a Swedish bank of $3,600 (10% withholding tax had been deducted). Advise Jamee how each payment would be treated, provide relevant section, case law and other supporting evidence. Calculate Jamee’s assessable income for the current year ended 30 June 2020.

Answer 1

The main sources of income for Jamee include gross salary, net interest, amounts received as winnings from a punters club, backpay, Frank dividend and interest on term deposit. It is important to note that the backpay amount of only $1000 is to be included for the IT assessment of 2019/20 and the rest $1000 will be included in IT assessment during the next financial year. Based on the ATO guidelines, Jamee is entitled to receive an exemption on the amount of PAYG withheld by his employer, TFN tax withheld and tax withheld on term deposit. The total taxable amount for Jamee is $ 75670. As per the resident tax rates 2019/20, Jamee’s income is in the tax slab of $37,001 – $90,000. This suggests that he needs to pay $3,572 plus 32.5c for each $1 over $37,000. According to this ruling the total tax liability for Jamee during 2019/20 would be $16140.

Assessment of Jamee's IT for the year 2019/20	Non-Savings ($)	Savings ($)	Total ($)
Sources of income
Gross Salary	82000
Net interest	745
Income from share in the winnings from a punters club	1100
Income received from backpay due to pay rise	1000
Income from franked dividend	8400
Income from interest on term deposit	3600
Total income during the year			96845
Costs to be exempted
PAYG amount withheld		20100
TFN withholding tax		715
Withholding tax of interest on term deposit		360
Total amount to be exempted during the year			21175
Total Taxable Income			75670
Marginal Tax Slab: $37,001 – $90,000 Amount			16140
Total Tax Liability			16140